Personal finance is full of confusing concepts, puzzling equations, and no lack of professionals with conflicting advice about what you ought to be doing and how you ought to go about doing it. With all that information swirling around in your head, and mixed with a general uncertainty about what the future holds, it's easy to find yourself completely unsure of what to do.
Know what I used to do when I felt completely overwhelmed and unsure which direction to go? Nothing. I'd freeze in indecision, get frustrated, and give up.
I spent a long time doing nothing before the frustration of inaction finally overtook the discomfort of not knowing what to do. Though I made some mistakes, things finally started coming together once I committed to taking action with my finances and career. That's why I can say that although times have never been more uncertain for me than they are right now, I've also never been more confident in my ability to work things out.
Whether it's an investment, a career choice, or another big life decision, here are some rules I've developed to help me figure out what to do when I have absolutely no idea what to do:
- Pick one thing and commit. If you're uncertain which direction to head, it's probably because you have too many choices. Should I increase my 401k savings? Start a Roth IRA? Do I need a financial planner? What if I need a will someday? Usually it doesn't matter which one you pick; it just matters that you do. Don't waste time searching for the best option; choose a good option and commit to it. Set everything else aside and focus on that.
- Ask yourself why it's important. It's easy to end up working on stuff that's important to some talking head, but not to you. But it can be difficult to focus and make good decisions when you're working on something you don't care about it. If it's not important to you, drop it immediately and work on something else. You'll give a lot more (and better) effort to goals you care about, so find a way to make it personal.
- Accept that you'll never have all the answers. The most successful people you know didn't get there because they found a way to answer every question; they made it because they learned to accept that they had to make decisions based on imperfect information. I'm almost certain that you can never be 100% certain about anything. Set a deadline for a decision and act on the best information you have on that date.
- Take baby steps. One sure-fire way to freeze in terror is to convince yourself that you have to figure out everything all at once. When it comes to money, the journey is just as important as the destination. Take baby steps in the direction that feels right and soon enough you'll find yourself sprinting towards your goals. If you want to start saving for retirement, pick an account and open it. Once that's done, then you can figure out how to start getting more and more money into it.
- Stop planning and start adjusting. Set a course of action, but don't be inflexible. If you force yourself to stick to it even if things go wrong, you'll be in more trouble than when you started. Instead, develop a rough plan and make adjustments as needed. Remember that it's only a guide, not a rule. If things go wrong, it's your job to steer in a different direction. If things don't look the way you think they should, change course and try again.
- Ask for help. This is important. Sometimes I get this idea that other people are too busy being awesome to have any time to help me, but in my experience, that hasn't been the case. Don't hesitate to send that email or make that call. You might be surprised by the results. I changed careers in February after being laid off from a job I hated and I wouldn't be nearly as far along as I am in my new writing gig if I hadn't mustered the courage to ask for a little help and advice from some very busy people.
- Throw away Plan B. Once you find something important to pursue, throw away your contingency plan. That doesn't mean you stop making course corrections; it means that you should take your goal so seriously that failure is not an option. Plan B is always easier than Plan A which means that, more often than not, Plan B will become Plan A when Plan A gets too hard. Some things are too important for a Plan B.
I don't always take this advice myself. Making a big decision is hard. Even if you make the right choice, you might not realize it for a very long time. At 25, it's still tough to say if I picked the best mutual funds for my 401(k) or if I got my IRA allocations right.
Heck, who knows if I even picked the right career? Sometimes I worry.
That's not so important, though. I know that I can change course if things go wrong. The game isn't over just because I made one decision. And in the long run, it won't be as critical as I think it is right now. What is important is that I keep tipping the scale towards action because the alternative is just more sitting and more head scratching.
I'm 25 and already starting to lose my hair. The last thing I need is more head scratching.
What tips do you have for deciding what to do when you have no idea what to do?